Caleres Lifts Guidance On Strong Famous Footwear Sales, Vionic Deal

Caleres Inc. lifted its guidance after a solid third quarter that saw the company get a boost from Famous Footwear and also announce the acquisition of Vionic.

The company reported net earnings were $29.2 million, while diluted earnings per share were 67 cents and included 14 cents for charges related to the acquisitions of Allen Edmonds, Blowfish Malibu and Vionic.

Adjusted net earnings of $34.9 million were up 1.6 percent, while adjusted diluted net earnings per share of 81 cents were up 1.3 percent—though short of Wall Street’s target by 7 cents—including approximately 2 cents of dilution related to Vionic interest and amortization expense.

“Famous Footwear delivered its seventh consecutive year of positive back-to-school same-store-sales, while Brand Portfolio showed sales improvement of 8.5 percent, as our top brands continued to take consumer share in the market,” said Diane Sullivan, CEO, president and chairman of Caleres. “In addition, we announced the acquisition of Vionic, a strong consumer demand brand, which has demonstrated solid growth over the past six years and is expected to be accretive to adjusted EPS in 2019.

“We also continued to accelerate the transition to our in-house distribution center for Brand Portfolio. While our in-house facility is up and running efficiently, the third-party facility expense has been far greater than expected,” continued Sullivan. “In an effort to eliminate the potential for incremental expense going forward, we have committed to exiting this third-party facility immediately following fiscal 2018 shipping. Due to these expenses, and our recent Vionic acquisition, we are updating our 2018 adjusted earnings per share guidance.

“We now expect to report fiscal 2018 adjusted earnings per share of between $2.25 and $2.35, and this range includes approximately $0.05 of dilution related to Vionic interest and amortization expense. This acquisition – along with other actions we have taken this year – is part of our strategy to invest for continued success, and our plans remain on-track,” concluded Sullivan.

Third Quarter 2018 Results Versus 2017

Consolidated sales of $775.8 million (beating estimates by $10.8 million).
Famous Footwear same-store-sales were up 2.8 percent. Total sales of $448.8 million were down 5.1 percent as expected, as one week of back-to-school sales shifted into the second quarter of this year versus the third quarter of last year.
Brand Portfolio sales of $327.1 million were up 8.5 percent, including Vionic.
Gross profit was $310.6 million, while gross margin was 40.0 percent and adjusted gross margin was 40.3 percent.
SG&A expense of $265.5 million represented 34.2 percent of sales.
Operating earnings were $39.7 million and included $7.2 million of charges related to the previously announced transition of Allen Edmonds’ consumer-facing activities to St. Louis, the July acquisition of Blowfish Malibu, and the October acquisition of Vionic, while adjusted operating earnings were $46.9 million.
Net earnings were $29.2 million, while diluted earnings per share were $0.67 and included $0.14 for charges related to the acquisitions of Allen Edmonds, Blowfish Malibu and Vionic.
Adjusted net earnings of $34.9 million were up 1.6 percent, while adjusted diluted net earnings per share of $0.81 were up 1.3 percent, including approximately $0.02 of dilution related to Vionic interest and amortization expense.

First Nine Months of 2018 Results Versus 2017

Consolidated sales of $2,114.6 million.
Famous Footwear same-store-sales were up 1.7 percent, while total sales were $1,241.6 million.
Brand Portfolio sales of $872.9 million were up 4.1 percent.
Gross profit was $878.6 million, while gross margin was 41.6 percent and adjusted gross margin was 41.7 percent.
SG&A expense of $774.6 million represented 36.6 percent of sales.
Operating earnings were $94.8 million and included $11.6 million of charges related to the acquisitions of Allen Edmonds, Blowfish Malibu and Vionic.
Net earnings were $70.0 million, while diluted earnings per share were $1.62 and included $0.21 for charges related to the acquisitions of Allen Edmonds, Blowfish Malibu and Vionic.
Adjusted net earnings of $79.1 million were up 9.1 percent, while adjusted diluted net earnings per share of $1.83 were up 8.9 percent.

Balance Sheet and Cash Flow

Cash and equivalents were $90.5 million and up $59.1 million year-over-year.
There were $350.0 million of outstanding borrowings under the revolving credit facility, following the October 18 acquisition of Vionic.
Inventory of $698.3 million was up 16.7 percent year-over-year and included $66.7 million of Vionic and Blowfish inventory.
Capital expenditures of $38.7 million year to date were flat to last year.

Pension Presentation

Results for this year reflect the new accounting standard related to the presentation of retirement benefits, which impacted reported and adjusted 2017 operating income and margin. The effect of this new standard resulted in a shift of $2.5 million of retirement plan income from third quarter 2017 SG&A expense to other income, net. For the nine months of 2017, this amount was $7.6 million. There was no impact to net earnings or earnings per share for the third quarter or first nine months of 2017, due to the adoption of this standard.